Test: Rational Thinking in a Crisis

End October 2007 my wife and I were flying from New York to San Diego. Due to an overheated engine our Captain took the one and only right decision: an emergency landing (at Chicago). Thankfully, a successful emergency landing.

Although - for a split second - we were disappointed that we would not arrive at San Diego that night, we immediately realized that our goal was no longer arriving at time, but surviving!

 How do we respond in crises situations? Take the next simple test to find out.

Original Source: Risk & Return

Estimating Bubbles

In a presentation for more than 200 actuaries at 'Actuarieel Podium" (actuarial Platform) on October 2 (2013) (Actuary Day) in the Netherlands, I tested the ability of Dutch actuaries to estimate the number of bubbles in a bottle of champagne.


Take the Test
Test your own bubble estimation ability. Think for a while:

How many bubbles are in a bottle of Champagne?

If you think you've got the right answer, check it by clicking on the picture below...

Conclusion 
If the order of magnitude of your answer was right: Congratulations!
If not, like most actuaries at my presentation, one thing is clear:

As actuaries we fall short in estimating bubbles!!!! (crises)

Key question is: why can't we estimate bubbles?

Short answer: because we have been only professionally trained in estimating relatively small numbers and small risks, not (systemic) crises.

One thing is sure: we need to fix this educational bubble-lack in our professional actuarial training.

Links
- Beekman Wines: Champagne - How Many Bubbles?
- Application of Actuarial Science to Systemic Risk Report (2013)
- Actuarial Viewpoints on and Roles in Systemic Risk Regulation
- Actuarieel Podium (Dutch)

Aftermath
49 Million Bubbles in a bottle of champagne may seem much, it's nothing compared to the U.S. Debt:



Learn more (in Dutch) on how we can do better as actuaries in the next presentation: 'From Backroom to Boardroom' (in Dutch) by Jos Berkemeijer

From Backroom to Boardroom (Dutch) from Jos Berkemeijer